Where do your credit card payments go?

Most consumers look to be getting a raw deal when it comes to paying off their credit card debts.

Research from price comparison site moneysupermarket.com reveals none of the main eight credit card providers allocate repayments to the most expensive debt first, costing customers dearly.

Steve Willey, head of credit cards at moneysupermarket.com, said: "The common practice of providers is to allocate your payments to the cheapest debts first. Take the case of someone who did a £2,000 balance transfer at 0 per cent and then spent another £1,000 on the card. If they then paid off £2,500, the remaining £500 balance would accrue interest at the typical APR (usually around 15.9 per cent) rather than continue to enjoy a 0 per cent rate.

"Thankfully Nationwide plays a lot fairer by the consumer, by clearing your most expensive debts first.

"Nationwide is a big player when it comes to mortgages, savings and current accounts. It is yet to make an impact in the credit card arena – where it only has two per cent of the cards in issue – so simple actions like this should help it grow market share.

"Other credit card providers are quick off the mark to attract customers with 0 per cent deals. However, they are much slower when it comes to educating people on what that 0 per cent actually means.

"Card companies seemingly have no appetite to help their customers with a fair approach to repayments.

"Balances are being split without consumers realising. Many cardholders paying the minimum balance each month are being stung because their money is only paying off the cheapest debt. This is why a 0 per cent balance transfer card isn't a good thing to spend on.

"Consumers really need to stay one step ahead of the game if they want to avoid lining the pockets of the banks. They should look to get a different card to spend with, whether it’s a Nationwide one or a 0 per cent purchase card. The only balance transfer card that it's a good idea to spend on is one with an equally long 0 per cent purchase offer, such as Halifax One which offers 12 months on both."